Amritsar Improvement Trust V. Commissioner of Income Tax II, Amritsar

ITA/100/2014

AI Insights

The case involves the Amritsar Improvement Trust appealing against the decision of the Income Tax Appellate Tribunal, which denied them exemption under Section 11 of the Income Tax Act, 1961, on the grounds that their activities were not charitable. The Trust argued that their activities, which include purchasing and developing land, do not constitute trade or business, and thus should be exempt from taxation under the specified section. The legal debate centered around the interpretation of 'charitable purposes' as defined in Section 2(15) of the Act and the impact of the 2009 amendment which excludes certain activities from being considered charitable if they involve trade, commerce, or business.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 804884 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 06-08-2014
• Assessment Year: misc
• Other Referred Cases: Institute of Chartered Accountants of India and another vs. Director General of Income Tax (Exemptions) and others, Bureau of Indian Standards vs. Director General of Income Tax (Exemptions), Director of Income Tax (Exemption) vs. Sabarmati Ashiana Gaushala Trust
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: G S HOODA; DENESH GOYAL
• Assessee Lawyers: SALIL KAPOOR; RISHAB KAPOOR; VARUN GUPTA
• Keywords: Charitable purpose; Exemption under section 11; Income tax appellate tribunal; Special Audit; Punjab Improvement Act 1922
• Section: 143(3); 142(1); 143(2); 11; 12A; 142(2A); 260A; 254(1)

Judgement Text

"ITA No.100 of 2014 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.100 of 2014 (O&M) Date of decision: 06.08.2014 M/s Amritsar Improvement Trust ……Appellant Vs. Commissioner of Income Tax II, Amritsar …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE FATEH DEEP SINGH Present: Mr. Salil Kapoor, Advocate. Mr. Rishab Kapoor, Advocate. Mr. Varun Gupta, Advocate in ITA Nos.100 and 111 of 2014. Mr. Devinder Pal Suri,Advocate for Mr. Rohit Sood, Advocate in ITA Nos.19 of 2012, 24 and 25 of 2013. Mr. G.S.Hooda, Advocate for the revenue(Bathinda). Mr. Denesh Goyal, Advocate for the revenue (Amritsar). Ajay Kumar Mittal,J. 1. This order shall dispose of a bunch of 8 appeals bearing ITA Nos.19 of 2012, 24, 25, 229 of 2013, 18, 24, 100 and 111 of 2014, as according to the learned counsel for the parties, the primary issue involved in all these appeals relates to the charitable nature of the activities of the appellant-Improvement Trust though the substantial questions of law GURBAX SINGH 2014.11.11 12:30 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.100 of 2014 2 claimed in connected appeals are in varied terms. However, the facts are being extracted from ITA No.100 of 2014. 2. ITA No.100 of 2014 has been preferred by the appellant Improvement Trust under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 24.2.2014, Annexure A.9 passed under Section 254(1) of the Act by Income Tax Appellate Tribunal, Amritsar (in short, “the Tribunal') in ITA No.636/(ASR)/2013, claiming following substantial question of law:- “a) Whether in view of the facts and circumstances of the case, the appellant trust established under Punjab Improvement Act 1922 exists for charitable purposes under the Act? b) Whether in view of the facts and circumstances of the case, the Tribunal has erred in law and on facts in upholding the order of CIT(A) in denying the claim of exemption under Section 11 of the Act on the ground that appellant does not exist for charitable purpose when no such issue was under consideration before the Tribunal? c) Whether in view of the facts and circumstances of the case, the tribunal has erred in law and on facts in denying the claim of exemption under Section 11 of the Act on the ground that same has been disallowed in assessment year 2006-07 and assessment year 2007-08 when facts of such assessment years are distinguishable? d) Whether respondent has in view of the facts and circumstances of the case erred in law and on facts in not adjudicating the additional grounds raised by the appellant after admitting it? e) Whether in view of the facts and circumstances of the case, the Tribunal has erred in law and on facts in holding that appellant did not file evidence with reference to expenditure before the CIT(A) when same has been filed before him? GURBAX SINGH 2014.11.11 12:30 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.100 of 2014 3 f) Whether on the facts and in the circumstances of the case, the tribunal has erred in law and on facts in upholding the order of Assessing Officer without deciding the addition on merits when the same has been challenged before it? g) Whether on the facts and in the circumstances of the case, the findings arrived at by the Tribunal are perverse, in as much as no reasonable person correctly informed of the provisions of law would come to such a conclusion? h) Whether on the facts and in the circumstances of the case, the Tribunal has erred in law and on facts in not deleting the additions on merits without even discussing the issues when the same were argued in detail particularly when it itself in its earlier order had permitted it? 3. A few facts relevant for the decision of the controversy involved as narrated in ITA No.100 of 2014 may be noticed. The appellant trust was constituted under the Punjab Town Improvement Trust Act, 1922 (in short, “the 1922 Act”). The main activity of the appellant trust is that of purchase of land and after development of the area, the sale of immovable properties both residential and commercial. It applied for registration under Section 12A of the Act on 17.3.2006 which was refused by Commissioner of Income Tax (CIT) but vide order dated 22.2.2008, Annexure A.1, the same was granted by the Tribunal. The said order was upheld by this Court vide order dated 31.10.2008, Annexure A.2. The assessee filed its return of income for the assessment year 2004-05 at loss of ` 594.92 lacs. Notice under Sections 143(2) and 142(1) of the Act was issued to the assessee. The Assessing Officer disallowed claim for exemption under Section 11 of the Act on the ground that registration under Section 12A was rejected by the CIT. The Assessing Officer referred the matter to special audit under Section GURBAX SINGH 2014.11.11 12:30 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.100 of 2014 4 142(2A) of the Act with the approval of CIT on 23.2.2006. The Assessing Officer on the recommendation of special auditor framed assessment under Section 143(3) of the Act and made addition of ` 14,34,10,160/- vide order dated 6.12.2006, Annexure A.3. The appellant challenged the said order before the Commissioner of Income tax (Appeals) [CIT(A)]. The appeal was dismissed by the CIT(A) vide order dated 22.12.2008, Annexure A.4. Aggrieved by the order, the assessee filed appeal before the Tribunal. Vide order dated 26.6.2009, Annexure A.5, the Tribunal referred the matter to the CIT(A) for reconsideration. The CIT(A) vide order dated 18.3.2011, Annexure A.6 sent the appeal of the assessee to the Assessing Officer in remand proceedings and directed him to examine as to the applicability of Sections 11 and 12 of the Act. The appellant went in appeal before the Tribunal. The Tribunal vide order dated 3.9.2012, Anenxure A.7 set aside the order of CIT(A) on the ground that first appellate authority i.e. CIT(A) did not have power to set aside the matter and allowed the appeal of revenue. Vide order dated 4.10.2013, Annexure A.8, the CIT(A) disallowed the claim of exemption under Section 11 of the Act. Feeling aggrieved, the appellant filed appeal before the Tribunal. Vide order dated 24.2.2014, Annexure A.9, the Tribunal dismissed the appeal and decided the issue against the assessee. Hence the instant appeals by the appellant trust. 4. We have heard learned counsel for the parties and perused the record. 5. The core or real controversy raised herein, as we perceive, relates to two issues. Firstly, whether the appellant-trust is an institution which carries on charitable activities within the meaning of section 2(15) of GURBAX SINGH 2014.11.11 12:30 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.100 of 2014 5 the Act and secondly in case the appellant trust is engaged in the activity of advancement of any other object of general public utility, can it be denied exemption in view of proviso to section 2(15) of the Act which was introduced with effect from April 1, 2009, whereby exception has been carved out in respect of charitable activities which involves the carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activity. The validity of the assessment framed can be examined thereafter. 6. Learned counsel for the appellant relied upon judgments of Delhi High Court in Institute of Chartered Accountants of India and another vs. Director General of Income Tax (Exemptions) and others, (2012) 347 ITR 99 and Bureau of Indian Standards vs. Director General of Income Tax (Exemptions) (2013) 358 ITR 78 and Gujarat High Court in Director of Income Tax (Exemption) vs. Sabarmati Ashiana Gaushala Trust (2014) 362 ITR 539 to contend that the amendment shall take effect from 1.4.2009 and would be applicable for assessment year 2009-10 onwards. According to the learned counsel, the amendment was not applicable to the period prior thereto. Support was also drawn from circulars of the Board bearing Nos.1/2009 dated 27.3.2009 and 11 of 2008 dated 19.12.2008. It was also contended that the Tribunal had erroneously adjudicated the issues against the assessee even without adverting to the provisions of the 1922 Act as the assessee was not carrying on business, trade or commercial activity. In the absence of any finding based on the GURBAX SINGH 2014.11.11 12:30 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.100 of 2014 6 provisions of the 1922 Act, the order of the Tribunal was unsustainable and the matter was required to be remanded to the Tribunal to adjudicate afresh after taking note of the aforesaid contentions and the pronouncements. 7. On the other hand, learned counsel for the revenue supported the order passed by the Tribunal. 8. After hearing learned counsel for the parties, in our opinion, the matter requires to be remitted to the Tribunal to adjudicate the issue regarding the nature of activities of the appellant trust whether they are in the nature of charitable within the meaning of Section 2(15) of the Act in respect of assessment years in question or not, keeping in view the arguments raised by the learned counsel for the appellant-assessee and to pass fresh orders relating to assessment proceedings thereafter in accordance with law. 11. Accordingly, the impugned orders passed by the Tribunal in all the appeals are set aside and the matter is remanded to the Tribunal to decide the same afresh in the light of the submissions made by the learned counsel for the appellant after affording an opportunity of hearing to the parties in accordance with law. Needless to say, anything observed hereinbefore shall not be taken to be expression of opinion on the merits of the controversy. Sincere efforts shall be made to decide the matter expeditiously. As a result, all the appeals stand disposed of. (Ajay Kumar Mittal) Judge August 06, 2014 (Fateh Deep Singh) Judge ‘gs’ GURBAX SINGH 2014.11.11 12:30 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.100 of 2014 7 GURBAX SINGH 2014.11.11 12:30 I attest to the accuracy and integrity of this document High Court Chandigarh "